OTTAWA—The Trudeau government is scaling back its carbon tax plan over concerns about competitiveness, a move being hailed by Ontario’s environment minister as a welcome “climb-down” and decried by environmentalists as putting short-term economic interests ahead of the health of the planet.

Under the new plan, which Environment and Climate Change Canada quietly published online last Friday, Ottawa will deliver higher rebates to heavy emitters as part of a strategy to keep them competitive and to discourage them from relocating to places where regulations are less expensive.

Starting Jan. 1, 2019, Ottawa will tax companies $20 for every tonne of greenhouse gas they emit, a levy that will ramp up to $50 per tonne in 2022.

Earlier this year, the federal government introduced special “output-based standards” to offset the cost of the carbon tax for heavy emitters that face tough foreign competition. Companies in these sectors were set to receive emissions credits — or rebates — worth 70 per cent of what an average firm in their industry was expected to pay in carbon tax. That means they would avoid paying the tax on this portion of their emissions.

The government now plans to beef up those rebates, a move that will lessen the carbon tax load even further for these heavy emitters. After months of consultation, “high competitive risk” industries — iron and steel manufacturers, and cement, lime and nitrogen fertilizer producers — will now get rebates worth 90 per cent of their industry average.